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posted by martyb on Monday September 30 2019, @01:37PM   Printer-friendly
from the It-would-be-a-shame-if-something-happened-to-your-ICO dept.

Ethereum 'ICO architect' arrested over alleged $12M cryptocurrency extortion

Two individuals in the US, including a former advisor to various blockchain projects including Ethereum, ETH have been arrested for their alleged role in a series of multi-million dollar cryptocurrency extortion.

According to a Department of Justice statement, former Ethereum advisor Steven Nerayoff and Michael Hlady were arrested after supposedly threatening to "destroy a startup cryptocurrency company if they were not paid millions of dollars" worth of Ethereum.

"As alleged, Nerayoff and Hlady carried out an old-fashioned shakedown, to be paid off with 21st century cryptocurrency," United States Attorney Richard Donoghue said in the statement.

The targeted company was an unnamed Seattle-based startup that uses cryptocurrency to reward customer loyalty. The unnamed company makes blockchain-based products for those looking to generate and reward user traffic.

The allegations are being lodged against Maple Ventures, an offshoot of Alchemist LLC, a blockchain consultancy founded and headed-up by Nerayoff, CNBC reports.

It's also worth noting that Nerayoff was pivotal in constructing the legal architecture behind Ethereum token offerings. On his own website he claims to have been called the "Architect of the ICO." One of his most recent ventures, – which he co-founded – CasperLabs, debuted its scalable, proof-of-stake blockchain on its testnet earlier this year.


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  • (Score: 1, Touché) by Anonymous Coward on Monday September 30 2019, @02:00PM

    by Anonymous Coward on Monday September 30 2019, @02:00PM (#900789)

    Remember kids, paper money is evil. And uncool. Your grandparents use it.

  • (Score: 3, Touché) by FatPhil on Monday September 30 2019, @03:51PM (22 children)

    by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Monday September 30 2019, @03:51PM (#900826) Homepage
    That he pushed the concept of taking money off people giving them something no intrinsic value in return?
    And we're surprised that he's a financial huckster?
    --
    Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
    • (Score: 3, Insightful) by JNCF on Monday September 30 2019, @04:13PM (9 children)

      by JNCF (4317) on Monday September 30 2019, @04:13PM (#900834) Journal

      What is this "intrinsic value" you speak of? Does fiat money have it? If not, sounds like a fair trade (based only on the statement you made). If so, on what grounds?

      • (Score: 2) by FatPhil on Tuesday October 01 2019, @05:50AM (8 children)

        by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Tuesday October 01 2019, @05:50AM (#901144) Homepage
        A guarantee from the body which levies taxes that you can pay your dues in it imbues it with a concrete value.
        --
        Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
        • (Score: 2) by JNCF on Tuesday October 01 2019, @09:42AM (7 children)

          by JNCF (4317) on Tuesday October 01 2019, @09:42AM (#901215) Journal

          Why did you attempt to switch the terminology being discussed without explicitly mentioning it, and what's the difference between "intrinsic" and "concrete" in this context?

          • (Score: 2) by FatPhil on Tuesday October 01 2019, @12:40PM (6 children)

            by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Tuesday October 01 2019, @12:40PM (#901246) Homepage
            concrete's non-abstract, an absolutely standard use of the term.

            How can I "switch the terminology" without "explicitly mentioning it"? I used new terminology, you noticed it, theoretically communication seems to have succeeded. I used a different term because I didn't want to use the previous term, isn't that obvious? You are supposed to work out which of your questions was being answered, and extrapolate the answers to the other ones such that the answer makes sense, I don't like having to spoonfeed people with tautologies.
            --
            Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
            • (Score: 2) by JNCF on Tuesday October 01 2019, @01:57PM (5 children)

              by JNCF (4317) on Tuesday October 01 2019, @01:57PM (#901278) Journal

              I feel like an intellectually open and honest response would have included something along the lines of "I recognose that fiat currency does not have intrinsic value, but I feel like it's still superior to crypto because..." before going into your bit about concrete value. As is, this exchange reads like a bait-and-switch fallacy to me. You've laid down a standard for one currency that you're unwilling to apply to your own currency of choice, and you haven't even owned up to being unwilling to apply the standard consistently; that part was implicit, not explicit. If I had simply gone along with your new terminology without calling you out on this it wouldn't necessarily have been clear to a casual reader that you had just moved the goalpost for your chosen horse while leaving the goalpost for the other horse where it was.

              • (Score: 2) by FatPhil on Tuesday October 01 2019, @11:47PM (4 children)

                by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Tuesday October 01 2019, @11:47PM (#901573) Homepage
                It was you who switched the subject matter from crypto to fiat currency, not I.
                --
                Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
                • (Score: 2) by JNCF on Wednesday October 02 2019, @12:37AM (3 children)

                  by JNCF (4317) on Wednesday October 02 2019, @12:37AM (#901604) Journal

                  Nope, (presumably fiat) money was mentioned in your original post:

                  taking money off people giving them something no intrinsic value in return

                  I was simply pointing out that the input had just as little intrinsic value as the output, meaning the issue you raised as originally stated had no merit.

                  • (Score: 2) by FatPhil on Wednesday October 02 2019, @08:00AM (2 children)

                    by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Wednesday October 02 2019, @08:00AM (#901740) Homepage
                    You do realise that "fiat" implies power, don't you? Now compare and contrast the two.
                    --
                    Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
                    • (Score: 2) by JNCF on Wednesday October 02 2019, @01:37PM (1 child)

                      by JNCF (4317) on Wednesday October 02 2019, @01:37PM (#901823) Journal

                      Amazing. When confronted by obvious evidence that your last comment was entirely wrong, you just ignore it completely and roll on through to a totally different argument. It's like you're engaging in dialogue to win rather than honestly communicate. The most impressive part is that you still have yet to admit that fiat momey does not have intrinsic value, preferring instead to dance around avoiding any direct statements on the subject. It's like watching a ballerina preform on a minefield.

                      Of course I understand the value of having a currency backed by a government's threat of force. I think there are other things that make money useful, like the ability to store it, uniform value across standardised units, making it hard to forge, etc., and I think a currency can exist and have value just because it has these qualities. Wampum beads (which used to be legal tender in New Amsterdam) and the gold dinar (which is currently used for trading in parts of the Middle East and North Africa) are two examples of tangible currencies with decentralised production. Of these two examples, the gold dinar has obvious "intrinsic value," but unless you want to argue that shell jewelry has intrinsic value cuz it makes you look pretty, it's pretty obvious that wampum beads were used as currency because of other properties; the blue shells were kinda uncommon, but the material wasn't useful for anything other shells weren't. The hard-to-find material plus proof of human work making a bead from it both contributed to the value of wampum beads and made them a viable currency.

                      See what I just did there, where I recognised the validity of your point before making my own? That's how you know that I'm capable of even a shred of intellectual honest. There's not much point continuing a dialogue with a wall.

                      • (Score: 2) by FatPhil on Wednesday October 02 2019, @05:38PM

                        by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Wednesday October 02 2019, @05:38PM (#901952) Homepage
                        You weren't comparing like with like.

                        Yes, I stop reading as soon as I see a flaw in your post, which is normally the first sentence. Same applies to this one.
                        --
                        Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
    • (Score: 2) by epitaxial on Monday September 30 2019, @06:56PM (11 children)

      by epitaxial (3165) on Monday September 30 2019, @06:56PM (#900923)

      Considering that I can exchange Ethereum directly into cash at many exchanges, your statement is false.

      • (Score: 3, Interesting) by JoeMerchant on Monday September 30 2019, @08:05PM (7 children)

        by JoeMerchant (3937) on Monday September 30 2019, @08:05PM (#900972)

        Sorry, that there's another sucker born every minute doesn't prove anything - where's the intrinsic value in your Ethereum tokens?

        Title to land has intrinsic value: the quiet enjoyment of the land and any productivity you might legally gain from it including construction and habitation of shelter.

        Title to a vehicle has intrinsic value: not only the value of transportation while it is functioning, but also the value of the materials should you chose to sell it for scrap.

        A latte ordered at a Starbucks may lack title, but you still have entered into a contract for delivery of something with intrinsic value - perhaps a value far less than what you paid, but the calories in the coffee are a small part of the stuff of life, intrinsically valuable to not only you, but any other person who might be thirsty or in need/want of a sugar buzz.

        Ethereum gives you a secret number. Should I copy your secret number(s) (all too easy to do), then I can impersonate you to the other holders of secret numbers and trade yours for theirs. And, in the end, it's all just secret numbers - infinitely copyable, easily forgotten / lost, and only worth anything to other people who believe that secret numbers might be worth something. You might compare it to Fiat currency, but at least Fiat currency is backed by governments who have military and police powers. Ethereum is backed by? Well, the fast talking of people like Steven Nerayoff and Michael Hlady, for one. Got any better examples?

        --
        🌻🌻 [google.com]
        • (Score: 3, Funny) by c0lo on Monday September 30 2019, @09:53PM (4 children)

          by c0lo (156) Subscriber Badge on Monday September 30 2019, @09:53PM (#900998) Journal

          You might compare it to Fiat currency

          Sometimes I wonder how a crypto currency backed by FIAT [wikipedia.org] would be named. Most of the time, 'tho, I don't.

          --
          https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
          • (Score: 2) by JoeMerchant on Monday September 30 2019, @10:26PM (3 children)

            by JoeMerchant (3937) on Monday September 30 2019, @10:26PM (#901008)

            Currency not only backed by Italians, but cheap Italian carmakers... that should inflate and fly like a weather balloon.

            --
            🌻🌻 [google.com]
            • (Score: 2) by c0lo on Monday September 30 2019, @10:40PM (2 children)

              by c0lo (156) Subscriber Badge on Monday September 30 2019, @10:40PM (#901017) Journal

              The carmakers aren't that cheap (after all, they bought Chrysler).

              --
              https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
              • (Score: 2) by JoeMerchant on Tuesday October 01 2019, @01:53AM (1 child)

                by JoeMerchant (3937) on Tuesday October 01 2019, @01:53AM (#901077)

                Makers of cheap, plentiful cars frequently buy and sell more "stately" marques, because they just aren't as big a business.

                Lee Iacocca wasn't a God, just a hospice nurse.

                --
                🌻🌻 [google.com]
                • (Score: 2) by c0lo on Tuesday October 01 2019, @02:19AM

                  by c0lo (156) Subscriber Badge on Tuesday October 01 2019, @02:19AM (#901093) Journal

                  Best example: Volkswagen [wikipedia.org], the owner of Audi, Porsche, Bugatti, Lamborgini, Bentley, Ducati (motorcycle).

                  Lee Iacocca wasn't a God, just a hospice nurse.

                  👍

                  --
                  https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
        • (Score: 2) by epitaxial on Monday September 30 2019, @11:28PM (1 child)

          by epitaxial (3165) on Monday September 30 2019, @11:28PM (#901033)

          The value is in what someone is willing to pay. Your land isn't worth shit if nobody is interested in it. Since you see no value in "secret numbers" I'll gladly take any you happen to have laying around. The darknet markets all take crypto so how do you explain that? Are they giving away real product for "secret numbers"?

          • (Score: 2) by JoeMerchant on Tuesday October 01 2019, @02:09AM

            by JoeMerchant (3937) on Tuesday October 01 2019, @02:09AM (#901089)

            Your land isn't worth shit if nobody is interested in it.

            That's where you're missing the point of: intrinsic value.

            Even when nobody (with money, or anything to trade) is interested in land, if you hold title to quiet enjoyment of the land, there is value there. Throw on a cow, it can eat the grass and you can sell the shit, literally, for fertilizer. Without land to graze on, the cow won't be making shit for long.

            Since you see no value in "secret numbers" I'll gladly take any you happen to have laying around.

            Here's a secret number:

            436f7773206561742067726173732c20636f7773206d616b6520736869742c20736869742073656c6c7320666f7220636173682c206861766520736f6d65207368697420666f7220667265652e

            Tell me what value you get for it.

            The darknet markets all take crypto so how do you explain that? Are they giving away real product for "secret numbers"?

            And grocery stores take Visa, and casinos take chips - it's a mutually agreed method of exchange. Neither my Visa card, nor a stack of poker chips have any intrinsic value.

            --
            🌻🌻 [google.com]
      • (Score: 3, Insightful) by FatPhil on Tuesday October 01 2019, @05:44AM (1 child)

        by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Tuesday October 01 2019, @05:44AM (#901142) Homepage
        Found the guy who doesn't know what "intrinsic" means.
        --
        Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
        • (Score: 2) by JNCF on Tuesday October 01 2019, @12:18PM

          by JNCF (4317) on Tuesday October 01 2019, @12:18PM (#901244) Journal

          See if he knows what "concrete" means, I have it on good authority that those two words can be used interchangeably without justification ;)

          P.S. Did you know Jimmy Hoffa is buried in intrinsic?

      • (Score: 2) by FatPhil on Tuesday October 01 2019, @05:55AM

        by FatPhil (863) <pc-soylentNO@SPAMasdf.fi> on Tuesday October 01 2019, @05:55AM (#901146) Homepage
        Oh, also spotted the guy who can't tell the differenence between a reasonably well established crypto-currency and a not-yet-established, and 99.9% likely to be useless unless you can find a bigger idiot immediately there's an open market, ICO.
        --
        Great minds discuss ideas; average minds discuss events; small minds discuss people; the smallest discuss themselves
  • (Score: 0) by Anonymous Coward on Monday September 30 2019, @03:55PM

    by Anonymous Coward on Monday September 30 2019, @03:55PM (#900829)

    Sounds like something Tom would do - if he were smart enough.

  • (Score: 5, Funny) by All Your Lawn Are Belong To Us on Monday September 30 2019, @04:31PM (3 children)

    by All Your Lawn Are Belong To Us (6553) on Monday September 30 2019, @04:31PM (#900845) Journal

    ... It's a deal on a bookkeeping entry on a Bridge in Brooklyn as well as one on this ocean beach in a desert...

    What? No, it's not the bridge or the beach itself you're buying. Someone else did that upchain. I'm just recording an entry in this ledger about them in exchange for your money.

    No, no, the entries themselves have nothing to do with the bridge or the beach, but you'll get these tokens that represent the entries in the chain of transactions.

    No, no, not real tokens! Just representations showing where your entry is located - they've got certificates of authenticity and everything!

    No, no, they're the same kind of tokens that were used when someone else bought the bridge and the beach, so the connection is so obvious. But if someone wants to trade you a bridge and beach for the ledger entries, you could totally do that. Well, really we'd just create a new ledger entry showing you gave up your tokens to them. But you see, that's the beauty of this! Then they could also trade their tokens for that - everybody ends up having gotten an entry and some ownership of bridges and beaches just for taking advantage of this fantastic offer!

    No, no, the bridge and beach people didn't themselves use the ledger. What do you mean, what do we use the ledger for? Isn't that obvious - you get the tokens by giving us the money - we worked very hard to craft those tokens... more so than the people who actually build bridges and beaches, or even those who finance them legitimately. So the ledger is where we record that you gave us money! Plus you get the tokens! How much more obvious can this be?

    No, no, you can't wait. You have to get in on them now, so that you don't lose your place to get them - there's no way you can get them for later cheaper... who knows, they might be entirely gone and then you'll never have had them.

    --
    This sig for rent.
    • (Score: 4, Touché) by janrinok on Monday September 30 2019, @04:45PM

      by janrinok (52) Subscriber Badge on Monday September 30 2019, @04:45PM (#900856) Journal
      I know it humour - but this is the best explanation I have ever read for blockchains and their associated currencies.
    • (Score: 3, Informative) by JoeMerchant on Monday September 30 2019, @08:09PM (1 child)

      by JoeMerchant (3937) on Monday September 30 2019, @08:09PM (#900974)

      Island Life

      Bob and Rita live in a small house with a big mango tree and a patch of grass just outside the Valley. Rita works in the supermarket and Bob has a grill cart that he keeps mostly down around Sandy Ground and George Hill. Bob has two grown daughters: Sharon and Karen who live in the Valley. When the big cruise ship is in Bob takes his cart down to Eddie's bar and cooks up a mess of curry goat to sell to the guests. Sharon has a car that she drives as a taxi, so she'll usually give Bob a ride and pick up folks from the dock who want to tour the island or get a quick ride up to the Reggae Shack. Eddie's bar is pretty far up the beach from the dock, but Charlie the launch captain tells the guests that it's worth the walk for Bob's curry goat, and Eddie has a great place with tables in the shade and a good breeze.

      In May when Rita's mangoes get ripe, they all get ripe within about 2 weeks. The tree is probably 80 years old and there are so many mangoes - she takes some to work, but mostly locals shop in the Valley supermarket, mangoes aren't anything special to them. Karen works in the hospital and she takes a couple of bags to share with her co-workers, but again they're mostly locals. Through Karen's co-workers some of Rita's mangoes end up in local restaurants, and of course Bob offers sides of mango with his curry goat. The guests rave about Rita's tree ripened mangoes when they get them, but the season for fresh tree ripened Haden* mango is very short.

      Island Blockchain Genesis

      One slow October day Eddie, Bob and Gene were hanging out and Eddie was talking about the bankers like Walter trying to make their next billion using blockchain. Bob said: "I wish I had their problems, I just want EC$3K so I can pay Dave to put an electric motor on my grill cart - if I could get up and down the hill easier, I'd sell a lot more curry goat." Gene is an old computer geek and he said: "you know, Bitcoin didn't start out as a billionaire's game, it got going as a grassroots project and grew up into what it is today - there are some kinds of blockchain that work well for smaller applications." Bob: "Yeah, how's that going to help me?" Gene: "Well, if you had your own blockchain and sold shares as promises for plates of curry goat, you could raise the money for your electric motor now, and deliver the goat later." Bob: "That sounds like too much contract and obligation for me, man. I sell my curry goat when it's ready, not on somebody else's schedule." Eddie: "Hey, I see how this could work. Bob doesn't need to promise the goat on any particular day, just that when somebody shows up at his grill cart and he's got curry goat ready, they can trade a pre-purchased promise for a plate of curry goat. Bob, I know you're almost always here when the Odyssey is in harbor, I'd front you EC$2000 against 100 plates - you move like 150 plates a month just at my place, right?" Bob: "yeah mon, you know I get EC$25 per plate at your place, too." Eddie: "I know, and I don't even ask for a cut because you help me sell drinks, but I also know when you roll that cart up the hill, you're getting more like EC$10 per plate up there. Plus, I'm fronting the money, there's still risk here even though I know you're good for it."* Bob was still skeptical: "I don' know man, puttin' chains on the workers don' sound good to me." But the more Bob thought about it, the more sense it made.

      Bob talked it over with Rita, and she was very excited about the idea. She invited Gene over and asked him how she might use blockchain to help her get her mangoes out to the resort restaurants when they are ripe, but not yet rotten. Gene thought for a minute and decided that Rita might make a conditional option the basis of her blockchain, so whoever holds mango credits in Rita's chain has the right to buy that amount of her mangoes at a fixed price, when they're available. Maybe Rita can find people who are willing to pre-pay a little now to get her mangoes for a good price when they are ripe. Since the whole blockchain is an open record, people purchasing mango options can check whether or not Rita has over-sold her tree's likely crop for the year. The option price can be EC$1 for a small mango, EC$2 for a large, the supermarket charges more than that for ordinary mangoes, and the resorts will pay much more for good quality fruit. Each credit on Rita's blockchain* is worth either one large or two small "mango options." It's all a little foreign to Bob and Rita, but Rita was enthused enough that she took a class at the community college in contracts and finance to learn more and maybe help her explain to people who might purchase mango options from her. For Rita, even if people pay almost nothing for her options, it gives her a way to find mango lovers when the fruit is ready.

      So, Gene and his friend Faythe set up a pair of recording servers. They set up Bob's blockchain to represent 1000 plates of curry goat. Again Bob was skeptical, he didn't want to ever be owing anybody 1000 plates of goat, but Rita explained how having too few shares avaialble would hurt market liquidity. Gene explained that Bob doesn't have to sell any plates of goat he doesn't want to, and when plates do change hands* there is a small transaction fee that is shared equally among all shareholders, so if Bob holds the majority of the shares he also gets the majority of the benefit from trading fees. Also, those trading fees will help to cover the costs of running the blockchain servers. Now Bob is really skeptical, but Gene tells him not to worry: for the first year he'll take one plate of curry goat a month to cover the server costs for him and Faythe, and after a year they can look at the real costs and see what makes sense. Bob says: "oh, now I get it, you want your curry goat for free! O.K. - I'll play this game for a year and we'll see what happens." Rita offers Faythe some mango options for her trouble, Faythe graciously accepts two mango option-credits per month even though she's allergic to mangoes.

      ICO: Initial Curry Offering

      Eddie makes good on his word and purchases 100 plates of Bob's curry goat for EC$2000. Eddie has a deal with Charlie already set up and he sells Charlie 50 plates for US$500. All that Bob and Gene know (at first) is that Eddie has split off 50 of his plates to someone else, since Charlie didn't identify himself in the transaction and he paid Eddie in cash. Charlie is happy because he has a similar system setup on other islands where guests going ashore give him some money up front and he gives them credits in an app in their phone. Then, when they are at participating places like Bob's grill cart, they can exchange their credits for services and goods like a plate of curry goat. Charlie is charging guests US$12 (EC$32.40) per plate of Bob's curry goat, but they're still happy with the system because they don't have to carry a lot of cash, and they can learn something about the places they are going to before they get there. For instance, Bob isn't 100% reliably available every time the Odyessy comes into harbor, but with the phone-app guests can check to see not only if he's there, but also when he's running low on goat and his best guess of when he'll be closing up shop for the day.* Bob has also completed some food safety and guest relations classes at the community college with great grades, and Gene linked evidence of these in Bob's blockchain which the guests' apps can verify against the college's open records, which include photos of a much younger Bob... So, now when they hit the dock and see Oscar's rusty grill right there, they can have more confidence spending their time walking up to Eddie's place to get the preferred curry goat plate from Bob, when he's around.

      http://mangocats.com/ao/IslandLife.html [mangocats.com]

      --
      🌻🌻 [google.com]
      • (Score: 2) by hemocyanin on Tuesday October 01 2019, @05:44AM

        by hemocyanin (186) on Tuesday October 01 2019, @05:44AM (#901143) Journal

        Ummm -- I read it to the end, glanced at the link -- wondering exactly what about this is informative?

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